B2B Projections Remain High Despite Obstacles

Electronic business-to-business (B2B) sales will reach more than $5.2 trillion in 2004 through several different channels, including Internet marketplaces, electronic data interchange (EDI), hybrid EDI/Internet electronic trading networks (ETNs), Internet company-to-company links, extranets, and private e-markets, according to Giga Information Group.

Giga had forecast an estimated $3.3 trillion in B2B e-commerce sales for 2000, most through traditional EDI networks.

“As business-to-business e-commerce matures, there will be no single ‘magic channel’ that meets all companies’ needs,” said Andrew Bartels, a Giga Information Group VP and research leader. “The B2B e-commerce market — which will account for approximately 38 percent of all B2B sales in 2004 — will get complicated because there will be a need for a variety of electronic interactions, each with its own set of strengths and weaknesses, particularly in the areas of reliability, security, customizability, and cost. Because the lines between traditional EDI and Internet channels are dissolving, companies now have the flexibility to use different e-channels for different customers or suppliers based on strategic business goals.”

According to Giga, corporations will need to match the right channel to the right customer or supplier. Key strategic relationships, for example, should use more secure and reliable channels, such as private EDI networks or ETNs, Giga found, with the most strategic of these using more customizable channels like extranets. Smaller customers or suppliers could be migrated to lower-cost channels such as Web-based EDI or Internet e-marketplaces.

“The need for multi-channel B2B e-commerce will increase the overall complexity of relationships,” said Ken Vollmer, a Giga Information Director. “The economics of the Internet will continue to dramatically influence B2B sales, but just as there always will be a need for face-to-face contact and brick-and-mortar stores, there will be a need for a mix of the long-used EDI and newer Internet-based methods of business-to-business commerce. The nature of the product or actual sale will dictate which channel needs to be used. As a result, successful companies will assess their B2B channels and begin to implement a multi-tiered electronic channel management program.”

According to a survey by ActivMedia Research, Web site executives think 2002 will be the year B2B e-commerce revenues surpass online retailers selling direct to consumers. The survey also found B2B revenues online will triple in 2001 to reach $263 billion.

More than half of all B2B Web sites (55 percent) attempt to generate sales indirectly from their sites, as a result of marketing but not active sales at the site, ActivMedia found. One-third (32 percent) actually generate sales directly at the site, and the remainder (13 percent) make no attempt to sell at their primary site. B2B marketers may also be shifting the way they use their sites. Firms that have been online the longest are the most likely to attempt to generate sales indirectly, as are firms that are younger. More 2-year-old B2B sites are going the indirect sales route. In contrast, twice as many one-year-old and three-plus year-old firms are selling direct.

A survey released by B2B technology firm Edifecs has found what it calls “critical barriers” to realizing optimistic industry forecasts for overall B2B growth.

The Edifecs study, “Solving the B2B Ramp-up Challenge: Key to Realizing Widespread B2B Adoption”, found the biggest obstacle to widespread adoption of B2B e-commerce is manual “enablement”, or the process of preparing a company, its internal systems, and its trading partners to begin conducting transactions over all of its trading networks.

The study found it is taking an average of three months to ramp up just one electronic process with a single trading partner. The companies that took part in the survey have plans to greatly expand their B2B initiatives, but are currently able to transact only a tiny percentage of their business with a small percentage of their trading partners.

“B2B, by definition, is all about communities, but trading communities on the Internet, whether theyre part of an exchange or a private network, are taking far too long to get off the ground,” said Edifecs CEO Sunny Singh. “For B2B communities to prosperto really attain the kinds of benefits everyone is talking aboutthey must comprise hundreds or thousands of participants actively collaborating with each other. This is the scenario that research firms and analysts have in mind when they come up with their B2B growth estimates. Unfortunately, because the enablement challenge is so stiff, theres a considerable hill to climb before reality catches up with projections.”

The Edifecs survey also found that, regardless of a company’s size, experience with B2B e-commerce, or trading-partner base, equally little progress has been made in moving beyond even a small subset of possible functions in the B2B arena. For example:

  • 56 percent of companies surveyed currently conduct B2B operations with less than one-fourth of their trading partner base.
  • 77 percent currently conduct fewer than 15 processes electronically with their partners.
  • 45 percent exchange fewer than 5,000 electronic transactions a month.

Respondents, however, do expect this situation to change dramatically in the coming years. Nearly 50 percent expect to trade electronically with more than three-fourths of their partner base. Nearly 40 percent plan to conduct more than 25 processes electronically, and just over half expect to execute more than 50,000 electronic transactions each month.

Related reading

nurcin-erdogan-loeffler_wikipedia-definition-the-future_featured-image
pwc_experience-centre_hong-kong_featured-image
12919894_10154847711668475_3893080213398294388_n
kenneth_ning_emarsys_featured-image
<